Evaluating the Impact of Digital Transformation on GST Compliance among Manufacturing SMEs in Uttar Pradesh

Abstract

This research explores the relations of digital transformation with Goods and Services Tax (GST) compliance for manufacturing micro, small, and medium enterprises (MSMEs) in Uttar Pradesh, India. Using two detailed case studies, Shilp Kala Handicrafts in Moradabad and Anandi Pickles in Varanasi, the research examines how small enterprises overcome the early challenges amid GST implementation, including invoice mismatches, the limited levels of digital literacy, and misclassification of taxations. The study shows the significance of external interventions, including, among others, the hiring of GST consultants and the use of mobile-based accounting tools, in closing gaps of knowledge and compliance. It also highlights some key themes such as the implication of mismanagement of Input Tax Credit (ITC) on a firm’s cash flow, the need for the firm to be digitised as a means of being compliant, as well as the relationship between compliance and formal finance accessibility. Using thematic analysis and secondary data, the paper identifies region specific views on how localised digital strategies can empower local micro enterprises to survive a post-GST era. The findings demonstrate the need for strategic policy support; digital learning programs, and scalable tech solutions that will empower GST readiness and financial inclusion of MSMEs.